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As the environment for funds managers becomes more difficult, Henderson plans to introduce new products to the market and focus on higher margin business such as property and mutual funds to boost revenue and profits.
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It was the benign market conditions of the first half of the year - as well as an improved investment performance - to which chief executive Roger Yates attributes growth in this higher margin business. Indeed, there were net fund inflows of £400m into higher margin products, which now account for around 45 per cent of the group's £61.6bn assets under management and more than three-quarters of revenue. The group's total fee margin rose from 43 basis points to 56, while performance fees increased 44 per cent to £34.9m. And notwithstanding the changing investment climate, Mr Yates says the group remains on track to reach its targeted 70 per cent cost to income ratio for the year.
Profits were also boosted by an investment gain of £32m on the group's stake in Banca Popolare Italiana. On an underlying basis, pre-tax profit was up 31 per cent to £60.5m. And, if approved, Henderson will return £250m of surplus cash to shareholders by the end of October through a special dividend of 27.6p paid alongside its interim dividend on 29 October.
UBS expects full-year EPS of 8.89p (2006: 6.37p), rising to 10.39p in 2008.
HENDERSON (HGI) |
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|---|---|---|---|---|
| ORD PRICE: | 135p | MARKET VALUE: | £ 1,222m | |
| TOUCH: | 136-137p | 12-MONTH HIGH: | 176p | LOW: 87p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 59p* | |||
| Half-year to 30 Jun | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|
| 2006 | 46.2 | 3.3 | 0.88 |
| 2007 | 101.0 | 5.7 | 1.66 |
| % change | +119 | +73 | +89 |
Ex-div:17 Oct Payment:29 Oct *Includes intangible assets of £224m, or 25p a share |
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Henderson's shares are down 9 per cent since our sell tip (148p, 10 Aug 2007), but are still far higher rated than peers. So, despite its move to more profitable business, on a forward PE ratio of 15, the shares still rate a sell.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
